Tesla Replaces SolarEdge Inverter With One of Their Own
24 January, 2021
The effect on SolaraEdge's business will be marginal. Tesla is not expected to compete with SolarEdge and to sell its own inverters to energy system manufacturers
Tesla has launched an inverter of their own making for their home solar panels. Up until now, the inverters used by Tesla were manufactured by two external suppliers: the Israeli SolarEdge and the Taiwanese Delta Electronics. The collaboration between Tesla and SolarEdge started in May of 2015, before Tesla started marketing solar panels.
The inverter is an electrical circuit that changes direct currents (DC) that the solar panels produce into alternating currents (AC) that can be routed into the grid. Tesla’s inverter will be an inseparable part of the solar panels they market for the residential market, and it will be specialized for their home battery backup. Their inverter comes in two power supply settings: 3.8 kilowatts and 7.6 kilowatts. It is equipped with a wireless communication that allows the user to track the panel’s output and power usage using Tesla’s application, and to perform over-the-air (OTA) software updates.
Tesla’s solar strategy follows their EV strategy
The Tesla inverter’s most prominent downside compared with SolarEdge is efficiency: 97.5% vs SolarEdge’s 99%. Tesla has two product lines in the solar power market: a solar backup battery for the home (Power Wall) and solar panels for the home (Solar Roof). Tesla’s activity in the field began with purchasing SolarCity (founded by two of Musk’s cousins) in 2016 for 2.6 billion dollars.
The development of the inverters for solar panels fits with Tesla’s strategy in the electric car markt – developing all of the parts in the system, in order to better control the supply chain and costs. It is unclear whether from now on all of Tesla’s solar panels will be based on their inverter or if they will still depend partially on external suppliers.
SolarEdge lost a Customer, but did not “gain” a Competitor
The effect this decision on SolarEdge’s business is expected to be limited. Tesla does not intend to sell their inverter to other solar panel manufacturers, and therefore in the worst case scenario, SolarEdge will lose one significant customer – but won’t have to face a new competitor. Tesla’s share of the home solar market is not very large. According to the Wood Mackenzie report, at the end of 2019 Tesla was rated the third largest supplier of solar panels in the private market in the US, after Sunrun and Vivint, with only 5% of the market.
Tesla’s part of SolarEdge’s income is not significant. In the second quarter of 2020, Tesla installed solar panels with a total power supply of 27 megawatts. That same quarter, SolarEdge inverter’s sales totalled at 1,440 megawatts. In the third quarter, Tesla reported that their solar installations tripled, but didn’t expose the exact figure in terms of power supply. Nevertheless, it is possible that all this may change in the future: even though Tesla’s activity in the solar market is only 5%-10% of their income, the founder and CEO of the company, Elon Musk, has declared consistently that he believes that the company’s activity in the solar field will level with its activity in the electric car field.